(By Rich Bieglmeier) We don't know if it's a bad omen or not, but last week was slow for insider buying as the number was about half of what iStock normally sees. Perhaps, the lack of insider activity can be blamed on ad indecisive week of trading, or could it be many executives are witnessing the same weakness FedEx (FDX
) and Intel Corporation (INTC
NII Holdings Inc.
) is a company with multiple small insider purchases that we decided to investigate further. CEO, Steven Dussek bought $296,000 and Alfonso Martinez, (EVP, Human Resources) picked up about $10,000 in the wireless communications stocks.
While Dussek's purchase is more impressive, Martinez's recent history of market timing is worth noting. In April 2012, he sold at $19.51, right before the stock crashed on a disappointing earnings announcement. The company that offers wireless phone services under the Nextel brand in Brazil, Mexico, Argentina, Peru and Chile is scheduled to announce earnings on October 22, 2012. Human Resources manager can know the health of a company better than most executives. Think about it, they know demand based the company's hiring plans. Could a surprise in the opposite direction be on tap?
The stock chart is encouraging as iStock see a wave of accumulations with heavier than normal volume dating back to the start of August. Meanwhile, the share price has slowly crept up from its year low of $5.65.
News of the insider buying helped jack the price of the stock above resistance at $8. As any trader knows, broken resistance becomes support. As we type, shares are on the verge of turning support into resistance once again; however, a more sturdy safety net can be found at NIHD's 50-day average of $7ish. It's the address where the 12, 26, and 50-day trend-lines meet. The short-term averages crossed above the 50-day benchmark and lined up in bullish, descending order with the shortest on top.
NII Holdings has experienced the pattern only once before in the last 12 months. In February 2012, the moving averages briefly moved to a bullish position, and the stock jumped for $20 and change to $24 in a matter of weeks. Two months later, Martinez was selling, and earnings disappointed.
In the most recent quarterly report, Nextel-Latino increased the handsets and devices in commercial service in all five countries they serve. During the first half of the year, expenses increased by 15% versus the first half of 2011. Under its current business plan, NOHD expects costs to continue climbing as they build new networks in Brazil and Mexico. Maybe the upgrades are starting to payoff?
QE3 could be another plus for the company as a falling dollar relative to currencies in Brazil, Mexico, Argentina, Peru and Chile benefits NII Holdings, maybe a lot. In the most recent 10Q, management wrote this, "If the values of local currencies in the countries in which our operating companies conduct business remain at levels similar to the end of the second quarter of 2012 or depreciate further relative to the U.S. dollar, our future reported operating results will be adversely affected."
If a rising dollar adversely affects operations, shouldn't a weaker buck enhance operating results?
Compared to its local competitors, Telecom Argentina S.A. (TEO), Telefonos de Mexico, S.A.B. de C.V. (TMXLF), and Telefonica Brasil, S.A. (VIV), NII Holdings trades at a substantial discount on a price-to-book (P/B) and price to sales (P/S) basis at .48 and .22, respectively. Meanwhile, the average P/B for the trio of peers is 1.91 and 1.2 for P/S.
Investors looking for exposure to the wireless market south of the border might find NII Holdings Inc. (NIHD) to be an attractive alternative to its counterparts – especially if Alfonso Martinez proves to be a leading indicator once again.